🎯 Harvest Price Option: Your Secret Weapon in Margin Protection (MP Part 2) 🎯

ByMike Rydell Reading Time: 3 minutes

When it comes to crop insurance, there’s one add-on that can quietly make a huge difference in your bottom line—especially when market prices start to climb. It’s called the Harvest Price Option, and in this post, we’re going to break it down so it makes total sense.

No spreadsheets required. Well, not yet anyway.

🌽 Wait, What Is the Harvest Price Option?

Think of it like adding a turbo boost to your crop insurance. The Harvest Price Option (or HPO if you’re tight on time) is an add-on that raises your coverage if the harvest price ends up higher than what was projected at the beginning of the season.

So if corn was projected at $6 a bushel, but it hits $7 at harvest? Boom—you’re protected at that higher price.

🔒 Without HPO: You’re Locked In

Without this option, your insurance sticks with the projected price. Even if the market soars, you’re still covered at that lower amount. That’s fine if the price drops, but what if it rises? That’s where you could leave serious money on the table.

🧮 Real Talk: Let’s Look at the Math

Let’s say you’re in this situation:

  • Projected Price: $6
  • Harvest Price: $7
  • Expected County Yield: 50 bushels/acre
  • Coverage Level: 90%

Without HPO:

  • Expected Revenue = 50 × $6 = $300/acre

With HPO:

  • Expected Revenue = 50 × $7 = $350/acre

That’s an extra $50 an acre in protection just from choosing the harvest price option. Multiply that by your acres and it adds up fast!

📉 Let’s Calculate the Payout

Using the above information let’s assume your expected costs are $250 per acre.

Expected Margin without HPO:

  • Expected Margin: Expected Revenue – Expected Cost
    • $300/acre – $250/acre = $50/acre
  • Deductible: Expected Revenue x (1 – coverage level)
    • $300 x (1 – 0.90) = $30
  • Trigger Margin: Expected Margin – Deductible
    • $50/acre- $30/acre = $20/acre

Expected Margin without HPO:

  • Expected Margin: Expected Revenue – Expected Cost
    • $350/acre – $250/acre = $100/acre
  • Deductible: Expected Revenue x (1 – coverage level)
    • $350 x (1 – 0.90) = $35
  • Trigger Margin: Expected Margin – Deductible
    • $100/acre – $35/acre = $65/acre

Actual Margin

Let’s assume the final area yield is 40 bushels/acre, and harvest cost is $260

  • Harvest Revenue: Final Area Yield x Harvest Price
    • 40 bu/acre x $7.00 = $280/acre
  • Actual Margin: Harvest Revenue – Harvest Cost
    • $280/acre – $260/acre = $20/acre

Now we need to compare the Actual Margin with the Expected Margin To calculate your margin protection payout 🧮

  • Without HPO: Expected Margin – Actual Margin
    • $20/acre – $20/acre = $0
  • With HPO: Expected Margin – Actual Margin
    • $65/acre – $20/acre = $45/acre loss
    • If you had 1,000 acres
      • Protection Factor of 100%: Acres x Margin x Protection Factor
        • 1,000 x $45 x 1.00 = $45,000
      • Protection Factor of $120%: Acres x Margin x Protection Factor
        • 1,000 x $45 x 1.20 = $54,000

NOTE – If you also have a revenue or yield protection policy, any payout from that will be subtracted from your margin protection payout.

💡 Key Takeaways

  • HPO is like an extra cushion for years when prices rise. It won’t lower your coverage—it only helps.
  • You have to elect it at signup. You can’t add it mid-season.
  • It does increase your premium, but it might be well worth it in volatile markets.

💬 Farmer-to-Farmer Advice

If you’ve ever watched market prices climb while your insurance stays stuck in the past, you know how frustrating that can be. The harvest price option is one way to make sure your policy grows with the market—not against it.

Not sure if it’s worth it for your farm? Talk to your agent. Run the numbers. Do the math.

But if you’re looking for coverage that actually keeps up with the real world, the Harvest Price Option might just be your MVP.

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